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December 10, 2012

FTC investigates makers of cellphone apps

Government officials concerned that software companies are violating kids’ privacy rights

WASHINGTON — The government is investigating whether software companies that make cellphone apps violated the privacy rights of children by quietly collecting personal information from mobile devices and sharing it with advertisers and data brokers, the Federal Trade Commission said Monday. Such apps can capture a child’s physical location, phone numbers of their friends and more.

The FTC described the marketplace for mobile applications — dominated by online stores operated by Apple and Google — as a digital danger zone with inadequate oversight.

In a report by the FTC’s own experts, it said the industry has grown rapidly but failed to ensure the privacy of young consumers is adequately protected.

The FTC did not say which or how many companies it was investigating.

Among 400 apps designed for kids examined by the FTC, most failed to inform parents about the types of data the app could gather and who could access it, the report said.

Other apps contained advertising that most parents would find objectionable or included links to Facebook, Twitter and other social media services where kids post information about themselves.

The report said mobile apps can siphon data to “invisible and unknown” third parties that could be used to develop a detailed profile of a child without a parent’s knowledge or consent.

“It’s not hypothetical that this information was shared,” said Jessica Rich, associate director of the FTC’s financial practices division.

The FTC also said it was investigating whether any of the apps developers engaged in unfair or deceptive trade practices, which would be illegal.

A trade group representing apps developers said the industry’s growth has been fueled largely by small businesses, first-time developers and even high school students who do not have legal departments or privacy experts on staff.

The FTC’s report is a reminder of the importance of educating developers on best practices for privacy, the Washington-based Association for Competitive Technology said in a statement.

In one case mentioned in the FTC report, an app that allows children to paint pictures and save them in an online photo gallery didn’t indicate that it included advertising.

But investigators said the app ran an ad across the bottom of the screen for an online dating service that said, “See 1000+ Singles.”

The FTC would not identify any companies it was investigating until a complaint is filed, Rich said. She said the agency expects the report will “light a fire” under the industry.

“We’re not naming names, in part because we think this is a systematic problem, and we don’t want people to think that if they avoid certain apps that they’re home free,” Rich said.

The commission is considering major changes to a 1998 law, the Children’s Online Privacy Protection Act, that would impose tougher online safeguards for children under 13.

Technology companies have warned that the proposed changes are too aggressive and could discourage them from producing kid-friendly content on the Internet.

But public interest groups have pushed hard for the changes, saying expanded use of mobile devices and methods for collecting personal data have outpaced rules put in place more than a decade ago.

The commissioners are expected to vote on the revisions to the law within weeks. Among the proposed changes is a requirement to prohibit the use of behavioral marketing techniques to track and target children unless a parent approves.

The changes also would cover a category of location information and data known as “persistent identifiers” which allow a person to be tracked over time and across various websites and online services.

An apps game called Mobbles violated the law by collecting personal information from children under 13 without providing any notice to parents or attempting to obtain prior and verifiable consent, a public interest group alleged in a complaint it said it would file with the FTC on Tuesday.

Mobbles is a location-based game for cellphones that allows kids to collect, care for and trade virtual pets like Krinker, a purple creature with a yellow flame on its head, according to the complaint from the Center for Digital Democracy in Washington.

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